According to the official statistics office of Turkey, the economy of the country went into recession at the end of last year.
There was shrinkage of 2.4 per cent in the economy of the country in the fourth quarter of 2018 compared to the numbers in the previous quarter, said the Turkish Statistical Institute. That reduction in the economy for the fourth quarter was preceded by a 1.6 per cent reduction in the quarter earlier which meant that there were two consecutive quarters of contraction which conforms to the official definition of a recession.
There had been a sharp fall in the value of the currency of the country after a trade war with the US following a diplomatic row which resulted in imports being made into turkey much more expensive than they were earlier.
There are a number of bones of contention between the US and turkey which include the manner in which to fight the Islamic State group in Turkey’s neighbour Syria, the decision of Turkey to purchase missile defence systems from Russia and the manner in which Turkey should penalize the alleged conspirators of a failed coup by the army in Turkey in 2016 in which a section of the army tried to overthrow President Recep Tayyip Erdogan.
The diplomatic row between the US and Turkey was about the demand of Turkey to extradite the a Turkish cleric now residing in the US. Turkey alleges that the cleric was among the chief conspirators of the coup and has also been charged with terrorism and espionage.
The row which went on for a few months, resulted in a 30 per cent drop in the Turkish currency the Lira against the US dollar last year. That made imports into Turkey costlier by at least one third on the average compared to before the drop in currency value. That crisis also resulted in the central bank of the country raising interest rates which made domestic borrowing costlier for Turkish companies as well as individuals.
This resulted in industries such as Car and housing being affected because of higher interests on loans for cars or homes while there was also an impact on industrial production.
Because of the contraction in growth in the fourth quarter, the overall economic growth of the Turkish economy was only 2.6 per cent on the overall for 2018 which was the lowest achieved by the country since 2009. In comparison, the growth rate of the country in 2017 was a robust 7.4 per cent.
This report of an economic recession in Turkey some at a time when President Erdogan is attempting to retain the control of key cities Ankara and Istanbul for his party as a part of a nationwide local elections.
Some of the major election issues included rising prices, especially for food, and high unemployment rates.
The worst was over, said Turkey’s finance minister, Berat Albayrak, about the economic condition. He added that by the end of this year., the economy would be back on a growth trajectory.
However, predictions by analysts at Capital Economics point to a poor performance of the Turkish economy in 2019.
“While the worst of the downturn may now have passed, the weak carryover means that we expect GDP to decline by 2.5% this year,” the firm said in a research note.
(Adapted from BBC.com)